NC Budget and Tax Center, Uncategorized

Renewed National Attention to NC Unemployment Insurance Cuts Tell Story of Harm and Unbalanced Approach

This week has already featured several prominent pieces on North Carolina’s unemployment insurance cuts with the final assessment that many jobless workers have likely been harmed and a more balanced approach to trust fund debt based on evidence not ideology was needed.

On Sunday, the New York Times featured a piece by Justin Wolfers of the Brookings Institution that made clear the evidence just isn’t there to support claims made that North Carolina is experiencing an economic boom and job growth resulting from the unemployment insurance cuts. And while he correctly points out that there is too little evidence to draw conclusions about what is happening in the economy, Wolfers fails to acknowledge that the harm to jobless workers from the cuts is significant enough to raise alarm.

Yesterday, Jared Bernstein of the Center on Budget and Policy Priorities followed up in the Washington Post by highlighting this very fact: there has been very real harm from the cuts created for jobless workers who now have fewer weeks to find a job in a labor market with too few and fewer dollars to meet basic needs, as the Budget & Tax Center documented in our recent report.

And then the Economic Policy Institute released a report looking across the country at states that cut unemployment insurance benefits. The report concludes that these decisions were not fiscal in nature but political and have had no appreciable impact on labor force improvements and been completely lopsided in their approach, effectively requiring jobless workers to pay employer’s debt. Here are a few of their key findings that are illustrative for North Carolina:

  • States with solvent unemployment insurance trust funds (the funding mechanism for the unemployment insurance system paid into by employers) before the Great Recession were less likely to borrow from the federal government.  A states’ experience was not a differentiating factor for states borrowing activities.
  • States that remained solvent had not cut UI-dedicate state taxes nearly as deeply as did other states during the 2001-2007 period of recovery and expansion.
  • Eight of 35 states chose to address their unemployment insurance trust fund debt with cuts rather than taking a balanced approach. What most of the eight states share is a recent history of not supporting safety-net programs not more drastic fiscal challenges.
  • Across the eight states, unemployed workers lost an average $252 per week of curtailed benefits just so states could save roughly nine cents per covered worker per week in UI-state taxes.
  • There was no visible improvement in state labor market outcomes—when looking at employment-to-population ration—following cuts to UI duration.

Bottom line from all this national attention, North Carolina policymakers made the wrong choice and jobless workers are being hurt as a result.

3 Comments

  1. Alex

    July 29, 2014 at 3:59 pm

    Kudos for Republicans getting us out of the huge unemployment debt so quickly that was incurred by the previous Democratic administration ! California is still saddled with $ 10 Billion in unemployment debt.

  2. david esmay

    July 29, 2014 at 7:48 pm

    Kudos for the Rubes in the GA for cutting the throats of their constituents!

  3. Alex

    July 29, 2014 at 8:04 pm

    Funny that we haven’t heard from Esmay for a good while. I thought he was still in his time machine back in the 80’s.